Report: Home market may further diverge

A potential homebuyer checks out a property project in Hangzhou, Zhejiang province, Dec 17, 2016. [Asianewsphoto by Long Wei]

Real estate markets in big and small cities will further diverge this year, with big cities likely to use more financing tools to curb speculation, said a report published on Tuesday.

The blue paper on the development of real estate, issued by the Institute for Urban and Environmental Studies of the Chinese Academy of Social Sciences, said investment in real estate development reached 10 trillion yuan ($1.45 trillion) in 2016, a record high and a year-on-year increase of 6.9 percent.

Real estate markets in key cities and lower-tier cities will further diverge, as top-tier cities are likely to take more measures against speculation when new supplies are limited, while lower-tier cities will continue to struggle to reduce inventories, the report said.

Risk management in cities with already high housing prices is a priority for policymakers along with reducing stocks in third- and fourth-tier cities, said Wang Yeqiang, a major contributor to the blue paper and a researcher.

"Demand for home loans, under such conditions, is likely to decline. Growth in home loans will slow, and lending rates are likely to rebound. In some cities, lending to homebuyers is likely to be further tightened," said Wang.

In Beijing, several banks have increased the lending rate up to 20 percent more than the benchmark rate for buyers of second homes since May 1, according to leju.com, a real estate trading information platform.

Residential property agency Homelink is reported to have closed some 300 outlets in Beijing as transactions decline in Beijing.

In Shanghai, more than 30 small property agencies have suspended their business due to the decline in transactions in preowned homes.

Tian Linbo, a Shanghai-based property agent, said: "Tightened financing for home buyers has led to a decline in transactions, particularly for preowned homes."

For some cities with lackluster transactions, developers said they expect average sales prices may drop, and their projects' value may shrink in the next few months.

Zhuang Qiange in Beijing contributed to this story.